People do not believe that they are likely to live longer than their parents or accept that they may need to work longer before collecting their state pension, according to the Institute for Public Policy Research (ippr). Its research into attitudes towards retirement and pensions shows that the public do not accept the fact that life expectancy is increasing and mistrust government, the financial services industry and employers on the subject of pensions.
In a report published today (Monday), ippr argues that the state pension age should rise to 67 between 2020 and 2030 if the UK pensions system is to be sustainable and to reflect increased life expectancy. However, it concludes that public mistrust makes reaching some clear political consensus on pensions and retirement vital if people are to be persuaded to work longer. ippr argues that a consensus on increasing the basic state pension to the level of the pension credit guarantee and restoring the earnings link would help shift public opinion.
ippr’s research is based on eight focus groups involving men and women between the age of 25 and 55 in London, Birmingham and Brighton. It shows that people expect their health to decline from the age of 70 and view retirement at or before 65 as sacred. Many say they do not intend to rely on the state pension and plan to retire at 65. However, they remain hostile to the suggestion that they might have to work longer before collecting a state pension and feel that they should be able to choose when and how they retire.
Peter Robinson, ippr Senior Economist and report author said:
« There is a consensus among pension experts that increased life expectancy will make it necessary for us to work longer. Our research shows that the public are not convinced and distrust the evidence from employers, the financial services industry and government, basing their expectations on the experiences of friends and family. This distrust means it is vital that the government achieve its objective of a popular consensus for pension reform.
« Raising the state pension age is vital if the UK pensions system is to remain sustainable and cope with the pressure of an ageing population. One way to build a consensus on increasing the state pension age is to link it with an increase in the basic state pension. »
Working Later: raising the effective age of retirement by Peter Robinson is available from www.ippr.org
ippr’s pension recommendations:
- Raising the basic state pension to just above the relative poverty line and ensuring it retains its value in relation to earnings in the future.
- Phasing out both the Pension Credit and State Second Pension since, with an enhanced non means-tested basic pension, they would be redundant.
- Raising the state pension age to 67 by 2030 to give a clear signal to the current workforce that we will need to work longer and to ensure the overall settlement is affordable over the long run.
- Simplifying the tax treatment of savings so that pensions are the most tax-favoured form of saving.
Notes to editors:
Working Later: Raising the Effective Age of Retirement will be launched by Stephen Timms MP, Minister of State for Pensions on Monday 25 July 11am at The Institute of Materials, 1 Carlton House Terrace, London SW1. Media are welcome to attend and should contact the ippr press office for accreditation.
Working Later: Raising the Effective Age of Retirement by Peter Robinson is supported by Norwich Union
Achieving a consensus on pension reform is one of the Government’s stated objectives. The then Secretary of State for Work and Pensions, Rt Hon Alan Johnson MP, at a speech at ippr on 24 February 2005, set out six principles for pension reform:
- The pensions system must tackle poverty effectively,
- The opportunity to build an adequate retirement income should be open to all,
- Affordability and economic stability must be maintained,
- The pensions system should produce fair outcomes for women and carers,
- Reform should seek to establish a system that people understand; and
- Reform should be based around as broad a consensus as possible
The Conservatives, Liberal Democrats and The National Association of Pension Funds agree it is necessary to raise the value of the basic state pension.
According to the Government Actuaries Department, a young man in the UK currently aged 19 and who will reach the age of 65 in 2051, is projected to live, on average, until he is 87 and an equivalent young woman, until she is nearly 90. Government Actuaries Department projections of longevity may be found at http://www.gad.gov.uk/Life_Tables/docs/5yrukperiod1981web.xls
ippr conducted eight focus groups in the spring of 2005. Each group was attended by between 4-6 participants, selected by an accredited market research organisation. The participants were paid a small incentive and the socio economic breakdown of the groups was as follows:
Group 1: female, 25-40 years old, BC1, London
Group 2: male, 41-55 years old, C2DE, London
Group 3: female, 41-55 years old, C2DE, Croydon
Group 4: male, 25-40 years, BC1, Croydon
Group 5: female, 25-40 years, C2DE, Birmingham
Group 6: male, 41-55 years, BC1, Birmingham
Group 7: female, 41-55 years, BC1, Brighton
Group 8: male, 25-40 years, C2DE, Brighton